2026 Expectations and Predictions

2026 is a verification year, not a promise year. Aggressive Fed cuts may arrive, but deficits, supply, and term premium keep financial conditions tighter than headlines imply, signaling fiscal dominance over monetary policy.

The macro backdrop deteriorates as the second-year hangover sets in—confidence fades, unemployment rises, inflation reappears, and markets stop paying for narratives and start demanding near-term cash flow. AI enters its payback phase, with scrutiny shifting from spend to ROI, favoring software over semis and exposing concentration risk in mega-cap leadership.

Equity markets see forgiveness fade, volatility rise, and breadth improve only after a meaningful pullback, while consumer stress spreads from the low end to the middle as the wealth effect wanes. Power, grids, and infrastructure emerge as real constraints, private credit reveals liquidity cracks, and M&A turns defensive. The year rewards selectivity, rotation, and risk discipline—not passive investing or policy/corporate promises.

Below are the Hedge Fund Telemetry 2026 Expectations and Predictions with a little of everything, including sports predictions.

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1) RATES: New Fed chairman signals more aggressive rate cuts, And It Doesn’t matter

• New Fed Chairman signals it will cut aggressively to 2%, with many Fed members dissenting.
• Long-end does not rally enough to meaningfully ease conditions.
• New Fed Chair (possibly named “Kevin”) grows frustrated and attempts some form of Yield Curve Control (YCC).
• Fed independence erodes; policy becomes more explicitly political → effectiveness diminishes.

This is the Fiscal Dominance pillar. The market is conditioned to equate “cuts” with “bullish,” but 2026 is a regime where cuts can be cosmetic if:

• Treasury supply / deficits keep term premium elevated, and
• inflation risk reappears, limiting how far the long end can fall.

What to watch:

• Term premium / auction tails / bid-to-cover: Are auctions driving the long end? They might.
• Financial conditions: if spreads stay tight while yields remain high, the equity multiple is the shock absorber.
• Any policy signaling that looks like “soft caps” on yields or a broadened toolset (explicitly or implicitly YCC-adjacent).

What proves this wrong?

A durable disinflation impulse that pulls the long end down without extraordinary policy (i.e., the bond market cooperates).

2) MACRO: Second-Year Hangover

• Trump 2.0 sees year-two fracturing in base/polls.
• Consumer confidence breaks the Covid lows (Conference Board).
• Unemployment >5% in 1H 2026.
• Inflation reappears: CPI back >4% (maybe 5%).
• GDP surprises on the downside later in 2026.

This is the “forgiveness-risk” setup: When unemployment rises and confidence wanes, markets stop paying for blue-sky narratives and start demanding near-term cash-flow proof.

What to watch:

• Conference Board expectations vs present situation (watch for “expectations” breakdown).
• Continuing claims trend and breadth of layoffs (not just tech headlines).
• Real wage growth vs inflation reacceleration.

What proves this wrong:

A re-acceleration in real income and labor stability that keeps consumption resilient despite higher prices.

3) FISCAL & TARIFFS: Rebate Checks, Bigger Deficit and $40 Trillion US Debt, Tariff Legal Mess

• “Tariff rebate checks” talked about but faces pushback in Congress
• Deficit stays ~$2T+; US debt crosses $40T.
• Tariffs average ~15%, but courts could intervene → messy refunds/workarounds/lawsuits.

This is the policy volatility pillar—markets struggle when rules change midstream, especially when:

• Corporations can’t price inputs with confidence, and
• Legal uncertainty creates an overhang on forward guidance.

What to watch:

• Corporate commentary shifting from “manageable” → “unquantifiable.”
• Margin pressure in tariff-sensitive supply chains.
• Litigation and refund headlines becoming a market-moving catalyst.

What proves this wrong:

Tariffs stabilize into an administrable framework, and corporates successfully pass through costs without demand destruction.

4) AI: “The Payback Year.”

• AI bubble pops: circular deals unwind/pushed out; capex growth slows on weak ROI.
• OpenAI IPO delayed / lower-than-hoped valuation of $1 trillion market cap.
• Gemini adoption outpaces ChatGPT.
• Nvidia and other 2025 AI narrative winners draw down 25%-50%.
• Software companies outperform semiconductor companies.

This is the key: 2026 becomes a cash-flow verification year for AI. The market stops rewarding “spend” and starts penalizing “spend without payoff.” This is consistent with the earlier framework: AI is not the question—timing and payback are.

What to watch:

• Shift from “capex is opportunity” → “capex is a margin headwind.”
• Rising scrutiny of utilization, not just build-outs (GPU hours sold vs installed base).
• The narrative moving from “platform shift” to “pricing pressure/commoditization.”

What proves this wrong:

A visible, broad earnings translation: productivity gains show up faster and across industries, and AI monetization improves without margin pressure.

5) Who’s Got The POWER? Data Centers First, Electricity Later, but what about China?

• Data centers keep getting built, but new buildouts are slowing down.
• The bottleneck becomes power generation + grid modernization.
• U.S. energy/electricity modernization becomes a strategic priority as China has the power but needs the chip technology

This is the “real economy meets physical constraint” pillar. Even if AI demand is real, the timing mismatch creates:

• Capex whiplash
• Permitting friction
• And sector rotation toward “boring” enablers.

What to watch:

• Interconnection queue headlines, utility capex, grid bottlenecks.
• Policymaker rhetoric shifting to energy security and permitting reform.
• Relative strength in grid/infrastructure vs AI application layer.

6) CONSUMER: The Air Pocket

• The middle-end consumer follows the lower-end consumer in a spending freeze.
• Credit card and BNPL defaults and auto repossessions increase.
• High-end consumer hits an air pocket when equities correct.

What to watch:

This is where the “soft landing” narrative breaks: the market learns that the wealth effect is a lagging stabilizer until it isn’t.

7) EQUITIES: Passive fund Concentration Breaks, Breadth broadens after pullback

• S&P performance has been overly dependent on mega-cap tech (and particularly NVDA-driven leadership).
• 2026 sees broadening and opportunities ex-tech, but after a significant pullback.
• At some point in 2026, the S&P will break under 5500. Maybe 5000.
• The passive funds are starting to broaden into unlikely sectors. Energy, Staples come to mind.
• Consumer discretionary (especially retail) is vulnerable early in the year.
• Chemicals/metals/defense/infrastructure “come off the mat.”
• Financials: tradeable both sides; avoid “owning” if unemployment rises.
• M&A increases, including “1+1=1” cost-cut consolidation. see below

This is the A-shaped market problem: when leadership is narrow, the index looks fine—until it doesn’t. If the leaders crack, the market is forced into:

• Multiple compression at the top,
• Mean reversion and rotation elsewhere,
• And a higher-volatility, lower-breadth-forgiveness tape.
• Potential for buyback activity to decrease in 2026.

What to watch:

• Equal-weight vs cap-weight inflection. Not with S&P but within individual sectors.
• Cyclicals/infrastructure leading while mega-cap growth chops.
• M&A as a “defensive” earnings strategy (cost takeout becomes the growth plan).

8) SINGLE-NAME & THEMATIC CALLS

Apple

• Tim Cook to Chairman; new CEO; board refresh; growth push beyond iPhone involves Apple buying several large companies to spur growth. Considering that the $2 billion Beats (headphones) acquisition was Apple’s largest deal, this will be a massive shift in strategy for Apple and a good one for the long term.
• Implication: multi-year transition story, but execution risk.

Alphabet

• Gemini adoption strength, “Other Bets” payoff with Waymo and TPU progress.
• Implication: relative winner in an “AI payback” regime if monetization discipline improves.
• Waymo remains and moves even further as the dominant autonomy platform; it expands to 10+ cities, including NYC, London, Dallas, Miami, and DC. Valuation of Waymo increases to private value of $300 billion from $100 billion.

Amazon/Meta/Microsoft

• “Sputter” risk on ROI scrutiny.
• Implication: narrative fatigue; the market demands measurable returns.

Tesla

• Tesla remains a core short idea as the market starts to question the 2025 promises that Elon Musk promised that failed to come true: 20-30% growth, Robotaxi service to be available to half the U.S. population by the end of 2025, Robotaxi goal to launching in eight to 10 U.S. metro areas by the end of 2025, he promised a massive technological leap in Tesla‘s driving software in 2025, saying drivers in many U.S. cities would be able to “go to sleep in your car and wake up at your destination” by the end of the year, and driverless robotaxis would be operating in June and at the end of the year. Musk said that Tesla would produce 5,000 Optimus robots by the end of 2025. Tesla then slashed its goal to 2,000, then further cut it. Musk and SpaceX have also said that in 2026, Optimus will go to Mars aboard SpaceX’s Starship.
• The bottom line is that Musk promises a lot and doesn’t deliver. 2026 could be a year when the market demands results.
• I expect FSD to remain at Level 2 autonomy (driver assist), which is a regulatory wall for robotaxi delays, as Level 4 is required (no driver required); Europe/China competition is increasing to take market share; product disappointments (Cybertruck, X/S, Berlin) could lead to European plant closure; and Cybertruck production is canceled. The expected output of the 2-seat robotaxi, promised to start in April, will not begin in 2026.
• Earnings risk: HW3: FSD limitation triggers lawsuits; emissions-credit tailwind ends; earnings/deliveries trend lower; potential losses.
• Optimus monetization is not possible in this decade; “demo” risk exposes a product not ready for market.
• Governance shift possibility (Elon → Chairman, new CEO).

SpaceX

• IPO happens; valuation comes short of the hype of $1.5 trillion; tiny float leads to initial big pop, then lockup-driven pressure.

Berkshire Hathaway

• Buffett’s retirement transition; cash war chest is a strategic advantage with weak market; Weschler-style discipline as a blueprint.
• The massive amount of cash, which has been laughed at over the last two years, will be Buffett’s most extraordinary gift to the new management.
• Expect two buyouts and five new prominent positions after the market pullback.
• This is a stock to buy on a 10% – 20% pullback.

Pure Cycle Technologies

• This high-risk/high-reward stock will make announcements involving major customers, and it will double and possibly triple in 2026.
• The new Thailand plant starts operation late in the year, another positive.

Crypto Treasury Stocks

• The leader Strategy faces liquidation/liquidity risks as Bitcoin price drops into the 70s, and other newer crypto treasury stocks fall, with some facing liquidation.

Metals ETFs

• These continue to be excellent trading vehicles with wild swings up and down all year.
• The last year of buying and holding will shake those late to the party.

Nuclear Power

• This was an excellent year for Nuclear power and Uranium stocks. We caught them well in Q1.
• It should be another good year, and we will see pullbacks that are meant to buy.

Golar GLNG

• The company will contract the last vessel and will receive a buyout at or above $65 in 2026

9) PRIVATE CREDIT: THE COCKROACH THEORY

If you see one problem, there are many you don’t see yet. 2026 might see quite a few cockroaches in credit.

• Stress events and blowups in private credit will expose underwriting weakness, valuation opacity, and liquidity mismatch.
• Panic bleeds into private equity, where:
  • Exit multiples compress
  • Refinancings become punitive
  • NAV marks lag reality

Why is this underpriced?

Private credit has been marketed as:

• “Lower volatility”
• “Floating rate protection”
• “Senior secured safety”

In reality, 2026 exposes that:

• Liquidity ≠ safety
• Mark-to-model delays volatility, it doesn’t remove it

Market transition – pathway in 2026

Private credit → PE NAV marks → fund-level leverage → forced asset sales → public market spillover

What to watch:

• “Isolated” fund suspensions or gated redemptions
• Sudden management changes at large private credit platforms
• Down-round M&A at sponsors previously marked “stable”

10) M&A involves more laggards than leaders

1 + 1 = 1 becomes the growth strategy.

• M&A accelerates as:
  • 2023–2025 laggards seek cost synergies
  • Organic growth fails to reaccelerate
• Early-year insider buying serves as a signal of pending deals.

Why this matters in 2026?

• M&A becomes defensive, not expansive.
• Boards prioritize EPS protection over vision.
• Deal premiums shrink; scale matters more than growth narratives.

What to watch:

• Insider buying clustered in underperformers
• “Strategic review” language replacing growth guidance
• Cash-heavy acquirers stepping in where public valuations have cracked

11) HOUSING: STUCK MARKET, WRONG CATALYST.

Rates drift lower, and affordability doesn’t improve unless…

• Mortgage rates ease slowly but:
  • Home prices remain elevated
  • Transaction volume stays depressed
• Housing does not clear until unemployment rises meaningfully.

Sad but true fact

The housing market does not reset on rates alone—it resets on job insecurity.

Implications and what to watch:

• Builders face margin pressure without volume relief
• Housing-related consumption remains capped
• Regional disparities widen (job-loss regions crack first)

A sharp rise in unemployment—not rate cuts—is the key to unlocking housing liquidity.

12) SPORTS BETTING: THE SCANDAL RISK

A trust-based market meets financial incentives.

• A major sports betting scandal involving a star player erupts.
• Fallout spreads across:

Why is this dangerous?

• Betting markets assume probabilistic integrity.
• One high-profile breach forces:
  • Regulatory scrutiny
  • Sponsorship pullbacks
  • Viewer skepticism
  • And of course, the integrity of players and sports

Market Angle:

• Betting platforms trade as growth-tech, but carry headline risk with regulatory tail exposure.
• Advertising drop off could hit media companies hard with large long-term contracts with leagues
• Valuation compression risk is asymmetric, including private market valuations of sports teams.

13) SPORTS & CULTURE

Baseball

• Los Angeles Dodgers win the World Series – I am 100% biased as a long-time Dodger fan.
• Baseball sees an increase in viewers and attendance after the best World Series ratings in decades.

Football

• Kansas City Chiefs transition as Travis Swift exits the league.
• New England Patriots win the Super Bowl (February). I have no bone in this matter.
• Political crossover moment: Trump calls for a national holiday the day after.

Basketball

• The NBA Finals will be the least-watched in 20 years.
• Viewer fatigue, gambling concerns, and star dilution converge.

Golf

• Players aligning with non-traditional sponsors (tech, fintech, AI platforms) may gain ancillary benefits (funding, visibility) that support preparation and resource needs.
• Brands will seek players with digital engagement metrics rather than just on-course results.
• Ludvid Aberg will be the breakout new star in 2026.
• He has the rare combination of length, efficiency, and composure. Rapid learning curve; no obvious weaknesses relative to peers. He’s built for majors and analytics-driven course setups.

14) FORMULA 1: TRANSITION YEAR, POWER SHIFT

• As you know, I love Formula 1, so it gets a little more attention.
• New cars, engines, and leadership reshape the grid. Apple, the new broadcaster, gets rave reviews.
• Mercedes wins the championship.
• George Russell narrowly beats Fernando Alonso with the new Adrian Newey-designed Honda-powered Aston Martin.
• Lewis Hamilton announces retirement.
• McLaren contends, Red Bull Racing struggles.
• Cadillac, the newest team, performs well in the midfield. American Colton Herta, an IndyCar star, does well in F2 and gets a Cadillac seat for 2027.
• Alpine hires Christian Horner formerly of Red Bull to lead the struggling team. People still loathe him.
• Max Verstappen signals a move to Mercedes or Ferrari in 2027 but signs with Aston Martin.

15) Hedge Fund Telemetry in 2026

• Look for a full rundown of significant changes to Hedge Fund Telemetry notes and formats in the next few days.
• One prediction is that we will launch the new website in Q1, which will include, but not be limited to, new long-only, short-only, and shorter-term trade ideas, along with shorter-term DeMark screens within the S&P that you can use more effectively on your own.
• More webinars and short market videos
• I’ll have more details soon.